Our Part-Time Stock Trading Side Hustle
Friends often ask us how we make money trading stocks. Our part-time stock trading side hustle seems to fascinate people! We started stock trading in 2013 to try and make some extra money. Since then, our part-time stock trading side hustle has been a great supplementary income stream.
We blog from home, so we are always on our computers – which is perfect for keeping a close watch on any stocks we are currently holding. Stock trading can be really exciting and lucrative! Here are a few of the primary reasons you may want to start stock trading. In some ways, stock trading is the ideal work-at-home business.
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The Earning Income Potential Is Huge!
Stock trading has unlimited earning potential. We know several traders that make millions of dollars every year by trading part-time! There really is nothing as high-paying as stock trading. How much you can make depends on how much capital you have to start trading with. Typically, the top traders can make as much as 200% profits per year!
Low Barrier to Entry
You can start stock trading with just a few hundred dollars. We actually recommend that you start with $100 or less! With this small amount, it is unlikely that you will make any significant profits, but you should learn with a small amount to minimize any early losses that you might incur.
The key to successfully starting to trade stocks with a tiny amount of money is to get access to a free broker account. Many conventional online stock trading platforms will charge you $6+ per transaction (buy or sell). This can really eat into any profits that you make with a small account size.
Luckily, there is a solution – the Robinhood App. Robinhood is an online brokerage that is totally free to use and has ZERO COMMISSIONS. It also does not have a minimum account balance – which is awesome! This is a huge advantage for new stock traders because it enables trading with a very small amount of money. We use Robinhood every day, both on the phone app and laptop and highly recommend it if you are a part-time trader.
Here is a simple way to get a free stock from Robinhood – if you open an account with Robinhood through our link, you will get a free share of a company’s stock to help you get started! The value of these shares can be anywhere between $4 – $200.
Part-Time Stock Trading Is a Very Flexible Side Hustle
If you have access to a laptop or cell phone, then you can start part-time stock trading. This makes stock trading the perfect work-at-home side hustle. Stock trading is one of those semi-passive sources of income. For example, you may buy shares of a stock in the morning and do nothing else until the next day or even a week later. Buying shares only takes a few minutes! So, you can see how passive this income source can be. In this article, we hope to be able to give you a high-level overview of trading stocks and explain how you can use it to make some extra money.
The Cons: The Risk of Trading Stocks
Now that we have told you all the reasons that you should give stock trading a try – here are some of the reasons that make it a difficult side hustle. The main issue with stock trading is the risk involved. It is possible to lose money. You can mitigate the risk involved by learning a strategy that works and adopting a highly disciplined approach to the business.
The main stream media love to compare stock trading to gambling – this is not a true representation of the business. Trading is all about risk management and control over your emotions. Fear and greed are responsible for ruining more than a few traders! It can take practice and experience to be able to control these emotions. We find this psychological part of trading very fun! If you like this type of mental aspect, perhaps you might be a natural trader.
How To Get Started with Part-Time Stock Trading
People often mistake trading stocks for investing in stocks. Investors buy and hold stocks in companies for many years. Usually an investor is motivated to purchase a company’s stock based on the underlying fundamental attributes of the company. This is quite difficult to do, because you never know what will happen to cause the stock price to fall. For example, Tesla or Facebook may seem like great long-term investments, but any big scandals about burning cars or data breaches could cause the price of these stocks to fall dramatically.
Trading stocks is a much faster way of extracting money from the stock market. We trade stocks on a relatively short time frame – typically we will buy and sell a stock over a maximum of three days. We will occasionally buy and sell a stock within the same day (this is known as day trading).
Why do we think that this type of active trading is a better approach? We have found that we get much larger gains, much more quickly than investing on longer time frames. We often see 5% – 20% gains in a week or two of trading stocks!
Our Advice for Getting Started
Early on in our trading careers, we learned a few basic rules that we try to trade by. These rules are quite simple, but powerful – following them will help you to preserve and grow your trading capital.
The golden rule that should NEVER be breached – only trade money that you do not need for anything else. Assume that you will lose it all. Are you OK losing 100% of the money that you have in a stock? This is unlikely to happen, but good traders focus on the downside and the worst case scenario. Being aware of what the maximum level of pain in a trade is, will help you to manage the risk accordingly.
- Always cut your losing stocks as quickly as possible. Most stock traders end up losing money because they focus only on making the big wins. The ones that succeed are usually the people that sell a stock if the trade goes against them. We usually try to sell a stock if it goes down more than 5%. The last thing that you want is to have a stock that falls 50% in price. This is difficult to recover from.
- Don’t sell a winning stock too quickly. We usually set a price target of 10% – 20% profits from our winning stocks. We have found that it is important to stick to this – if you sell too quickly, then the next small loss may just cancel out the winning trade. We have learned that if a trade is going well, we need to be patient and allow it to play out.
- Never hold a stock through an earnings call. Too much can go wrong – one wrong word or statement by the company insiders can negatively affect the stock price.
- Never let your emotions effect a stock trade. When we first started trading stocks, we were so anxious about every trade. This made us make bad decisions like selling a trade too soon or holding it too long.
If you are interested in starting to trade stocks, be sure to follow those rules. We always recommend that people find a simple strategy that they find works for them. Keeping it as simple as possible has been our key to success. We only trade the setups that offer the highest probability trade setups. This way we maximize our edge over the market.
How Do We Trade Stocks?
We only trade stocks that are very inexpensive. Usually this means stocks that are under $10 per share. Sometimes we even buy penny stocks (stocks trading at less than $1 per share). We trade cheap stocks because they are more volatile – the price can go up or down 10% or more in a matter of a few hours.
This gives us a unique opportunity to make larger gains than is possible by trading the higher priced ‘blue chip’ stocks. For example, try making 10% in a few hours trading Google stock! Even if you managed to catch a volatile move in Google stock, it is unlikely that you could afford to own thousands of shares!
Our trading strategy is based on price action NOT the underlying fundamental growth potential of the companies. How a company is growing is mostly irrelevant for short-term traders. We don’t even care if the company is failing miserably – if they send out a press release and that causes the stock price to temporarily soar, we will be happy to buy the stock and profit from the news.
Technical Analysis – Stock Prices Are Predictable
Most people don’t realize that it is possible to predict if the price of a stock is likely to go up or down in the short-term. The process is called technical analysis and it is a well-established technique to ‘predict’ where the price of a stock is likely to go (with a relatively high probability). Obviously, there is no way to know for sure what a stock price will do (if there was, then everyone would be rich!).
What Is Technical Analysis?
Technical analysis is not nearly as complicated as it sounds! It is simply the art of looking at the price over time of a stock and matching it to well-established patterns that traders have used for decades. It works because everyone is looking for the same patterns! So, when a bullish (the price is likely to go up) price pattern is observed by the trading community, a lot of people buy the stock which causes the price to go up! A self-fulfilling prophecy…
Here is a useful video that explains the difference between fundamental analysis and technical analysis.
Unfortunately, we cannot give you an in-depth overview of technical analysis in this article. It is a huge topic! We will try to outline the basics of how we make money with the simplest pattern that we use. We will also include some references at the end of the article for you to learn more from if you are curious.
Technical analysis starts with examining the price chart of a stock. To the untrained eye, the price action over time of a stock might look unpredictable and random. Often it is, but sometimes a pattern will appear that demonstrates there is some logic and reason to how the stock price is moving. Patterns often repeat over time which allows the savvy trader to ‘predict’ where the price of the stock might go next. One of the simplest patterns we can use to demonstrate this predictability is called the Channel Pattern.
We Primarily Trade Channel Patterns – They Are Easy to Spot
As a new trader, it can be easy to become overwhelmed by the vast array of technical chart patterns. In this article, we want to show you our favorite pattern called the ascending channel pattern. This is one of the easiest chart patterns to spot and very easy to trade. If you can draw straight lines on a chart between two points, then you can figure out how to trade the channel pattern! We understand that this explanation may be a little heavy reading – so the take home message is that stocks do behave in predictable ways and you can use this to make money with short-term trading.
Here is an example of a price chart of the share price of Amazon. It shows how the price of Amazon stock has changed over the course of the last 8-9 months. You can examine any stock price chart for free at places like Stockcharts.com.
You can see the channel marked out between the two blue lines. If you can spot the formation of the channel early on (between April and May in this case) then you can start to predict where the stock price might move. As the channel trends upwards, you can see that the stock price ‘bounces’ up off the bottom blue line.
This line is called the support line – it is where buyers step in and purchase the stock thus increasing the price. If you have drawn a clear channel like the one above, you can purchase the stock when it has trended down to the support line. There is a very good chance at this point that the stock price action will reverse and start going higher again! You can see this clearly marked on the chart (the green arrow marked ‘But Stock Here’).
The stock price will usually trend upwards until it hits the top blue resistance line. This is the point that traders will sell a stock, the price then decreases and the pattern repeats.
You can see how this works! Many traders spot the pattern forming and then they all trade it the same way! They buy the stock at the bottom line and sell it at the top. Buying and selling causes the price to reverse and this continues with everyone making some profit.
The most difficult bit is spotting the channel forming as early as possible to maximize profit potential. Even if you draw in the predicted channel, it is not guaranteed to actually follow it. In the case of the Amazon chart, the stock did follow the channel all the way until October. The red circles show where you could have potentially purchased the stock with minimum downside risk and maximum potential profit.
We have made money by repeatedly buying and selling inside channels like the one above. It can be like a money machine that can be repeated over and over until the price breaks down through the support line.
Risk Management – Accepting That the Channel Pattern Will Fail
Risk management is crucial in trading stocks. This is important because the patterns do not always work. Successful traders know that even the best patterns will fail half the time! The key to making a consistent profit is to sell the stock at the first indication that the pattern is failing. In the Amazon chart, a prudent time to sell would have been at the start of September when the price fell through the blue support line. The whole trick is to make sure that your losing trades are small losses that don’t cancel out the profits from the winning trades.
Stock Alerts Services for the Part-Time Trader
The hardest part of stock trading is to find the patterns in the first place. Professional traders use sophisticated software to scan for patterns forming. Some traders that have proven track records will offer premium services where they send clients the patterns and even alert when they are buying and selling a stock so that you can copy them. This is a great way to learn to trade and it is how we learned the business.
We currently get watch lists and stock alerts sent to us from one of the best services that we have ever found. You can even get a free masterclass from them here. It is worth $1,000 and they teach you the three main stock price patterns that have proved most profitable for them. We love the three patterns!
Everyone can make money trading stocks with a stock trading side hustle. Becoming a part-time trader is not easy, takes a lot of hard work and dedication but the financial benefits can be quite extraordinary. You only need a few hundred dollars to start trading and learning the skills required to make money.
Good luck on your financial journey!
Russell and Maleah
Have You Ever Traded Stocks? Please Let Us Know in the Comments If You Are Interested in Becoming a Part-Time Trader!